Regulating insurance: federal vs. state

By BenefitPlace.biz - BPTradeshow.com

BenefitPlace / BP Trade Show

This Fourth of July, we thought it would be appropriate to open a discussion on an issue as old as our nation — federal, centralized government regulation and control vs. states rights and autonomy. These same issues are fundamental to the current debates over health care reform, insurance regulation and controls over the financial services industries.

The battle that was shaped in the 1790s between the federalists, led by Alexander Hamilton, and the anti-federalists, led by Thomas Jefferson, were about the same — but broader — issues as today. While Hamilton was, with limitations, in favor of centralized controls, Thomas Jefferson was an advocate for states' rights.

History tells us that between the American Revolution and the ratification of the U.S. Constitution, the states had united under the Articles of Confederation. The federal government was given very limited powers and for the most part could not overrule the states. But the boundaries of authority were poorly defined under the Articles of Confederation.

According to Wikipedia:

The Constitution subsequently strengthened the central government, authorizing it to exercise powers deemed necessary to exercise its authority, with an ambiguous boundary between the two co-existing levels of government. In the event of any conflict between state and federal law, the Constitution resolved the conflict via the Supremacy Clause of Article VI in favor of the federal government, which declares federal law the "supreme law of the land" and provides that "the judges in every state shall be bound thereby, anything in the constitution or laws of any state to the contrary notwithstanding. However, the Supremacy Clause only applies if the federal government is acting in pursuit of its constitutionally authorized powers, as noted by the phrase "in pursuance thereof" in the actual text of the Supremacy Clause itself.

I believe the Supremacy Clause and the limitations imposed on it by the wording only applies if the federal government is acting in pursuant of its constitutional authorized powers is central to the current debates about insurance, benefits and financial services.

Alexander Hamilton, who was in favor of centralized government, explained the limitations of the Supremacy Clause by stating, " ...this clause placed on the proposed federal government, describing that acts of the federal government were binding on the states and the people therein only if the act was in pursuance of constitutionally granted powers, and juxtaposing acts which exceeded those bounds as ‘void and of no force’.”

The Supremacy Clause further stated, "But it will not follow from this doctrine that acts of the large society which are not pursuant to its constitutional powers, but which are invasions of the residuary authorities of the smaller societies, will become the supreme law of the land. These will be merely acts of usurpation, and will deserve to be treated as such."
Jefferson recognized the need for a strong central government in foreign relations and in times of war, but he did not want those powers expanded. While Hamilton's goal was efficient government, Jefferson feared tyranny.

Today, society and government entities are much more complex. Industries like insurance, benefits and financial services are national in scope and equally complex. Regulations, licensing, and policing imposed on a state-by-state level are extremely costly to the providers of the plans, programs and services and these costs are passed through to the consumers — individuals and organizations.

On this holiday celebrating the freedoms fought for and won by generations many times over, I am not proposing a solution — or for that matter giving my opinion. I am suggesting that as we look at the issues of regulating, controlling and policing the insurance, benefits and financial industries, we have an open discussion and debate about the core issue so dear to our founders.

We should discuss the ever expansive, with the influence of both Democrats and Republicans, disposition of centralized federal regulation and controls vs. state's rights and localized powers.

We should all remember that with every regulation, law, code, etc. our freedom as individuals is diminished.